Breaking News on Food & Beverage Development - North America

By Mark Astley, 23-Jan-2013

Dairy Farmers of America (DFA) has agreed to pay $158.6m to settle a 2007 lawsuit that alleged it conspired with Dean Foods and others to suppress raw milk prices across 14 Southeast US states.

The class action lawsuit, which was scheduled to go to trial yesterday, alleged that DFA, Dean Foods and others conspired to fix raw milk prices in the Southeast of the country by closing bottling plants and stifling competition.

DFA has agreed to pay $140m to the plaintiff case under the terms of the settlement. An additional $18.6m will be placed into a fund over the next two years to incentivise stronger Class I utilisation rates in Federal Orders 5 and 7, which cover a number of Southeast US states.

The DFA agreement pushes total settlements in the lawsuit to more than $300m.

Despite reaching the agreement, DFA stated that it will make “no admission of wrongdoing.”

“Remove a source of distraction”

“Our board and management team have worked diligently to put certain old issues behind us,” said DFA president and CEO, Rick Smith.

“This outcome positions DFA to fulfil a commitment to our members to resolve pending litigation, to remove a source of distraction for our leadership and to avoid additional legal fees.”

Dean Foods also refused to admit any wrongdoing despite agreeing to pay-out $140m.

Dean Foods’ chairman Gregg Engles stated at the time: “We continue to be confident that we have operated lawfully and fairly at all times in the Southeast.”

DFA added that it does not expect the settlement to affect its day-to-day operations or its ability to pay its members a “competitive price” for milk.

“The Co-operative remains healthy and poised for a bright future,” said Smith.

The Kansas City–based co-operative added that under the agreement, some business practices will be reformed to further “emphasise a culture of openness and transparency.”

Southeast milk market “reformed”

According to law firm BakerHostetler, which represented the plaintiff, DFA has agreed to take steps to allow raw milk prices to increase.

It has also vowed to remove cancellation penalties on full-supply agreements with bottling plants, and boost the transparency of its audits and financial disclosure, it added.

“The Southeast milk market has been reformed to the benefit of dairy farmers. The monetary recovery itself is very substantial and the resulting conduct changes will significantly and positively impact competition in the southeastern dairy industry,” said lead attorney for the plaintiff farmers, Robert Abrams.